News Analysis: After seven years of inaction, the FCC is again looking at the Special Access competition landscape to determine whether businesses are paying fair rates for data access.

The Federal Communications Commission announced that the agency was
asking for new data on the pricing and the competitive environment
around the Special Access market.

Special Access has come to the surface because of its inclusion as a
major point in the antitrust complaints by Sprint and Cellular South in
the AT&T-T-Mobile antitrust lawsuit. However, Special Access goes far beyond the needs of wireless companies.

While Special Access is getting a lot of attention right now because
wireless companies use the DS1, DS3 and Ethernet lines that make up the
Special Access infrastructure for their backhaul from cell towers. But
in reality, virtually every company that uses any kind of external
network access is using Special Access in one way or another. This
means the pricing and competitive information that the FCC gathers, and
uses for any subsequent ruling, can directly affect the bottom line of
your business.

The timing of the announcement coincides with the antitrust action by
the Department of Justice, but that wasn't intentional. In fact,
left to its own devices, the FCC probably would never have moved. It
required a Writ of Mandamus filed by the Ad Hoc Telecommunications Users Committee
and several other public interest groups to force the FCC to move
forward. The Ad Hoc group has already asked the FCC to take action to force the transparency and competition it thinks is necessary.

According to Maura Corbett, executive director of NoChokePoint, the two largest carriers, AT&T and Verizon, are overcharging on the order of $10 billion per year for Special Access. "We are very anxious to get the data and have the commission rule appropriately based on their data," Corbett said. "This has been open since 2005. We're still waiting." Both groups have filed petitions to deny the transfer of licenses in connection with the AT&T-T-Mobile merger. NoChokePoint is an advocacy group focused on Special Access.
"We would like to get to the point where it's acknowledged that the
market has collapsed," Corbett said, "and we want to see competition
and openness." Corbett noted that it was clear that there was no
competition when the FCC deregulated Special Access, and the prices
immediately went up.

Colleen Boothby, the attorney who represents the Ad Hoc Telecom Users
Committee also studied the effects of deregulation. "We noticed that
whenever the Commission deregulated Special Access, the price went up.
When they broke out earnings, they (the carriers) were making up to 135
percent profit," Boothby said. "In a competitive market you can't get
earnings like that."

Boothby's organization is comprised of Fortune 500 companies that use
Special Access in their telecommunications environment. The membership
list is kept secret because in the past, the two major carriers,
AT&T and Verizon, took retaliatory action against them, Boothby
said.

But the fact is that telecom charges are a major cost factor for nearly
every business, and with profit margins of up to 135 percent, greater
control over costs through competition or regulation would dramatically
reduce the overhead for most businesses. The problem right now is that
the two major carriers won't tell you what their profit margin is
because the FCC removed that requirement eight years ago. Prior to
that, there was customer pressure to keep the margins within reason.

What's interesting is that the docket item at the FCC was originally
opened at the request of Jim Cicconi, who is AT&T's chief lobbyist,
and who is now fighting the FCC action. But at the time of the request,
AT&T hadn't merged and was forced to buy Special Access services.
Now that AT&T and Verizon are providing the Special Access lines,
the two companies have formed an effective duopoly in that business.
Small operators are complaining that they are frozen out of the
business by predatory practices.

If this sounds familiar, it's because it's the same argument Sprint is
making regarding the merger of AT&T and T-Mobile. Sprint may have a
point, It's already dealing with an effective duopoly in its backhaul
and in its complaint is claiming that the costs associated with the
backhaul charges are anti-competitive.

Of course, AT&T and Verizon have to pay Special Access charges when
they cross over into each other's territory. The difference is that
they're paying each other for the same services and this effectively
cancels out any charges. of course, neither company is willing to say
how much it pays the other for Special Access, so they can set the
price to the other as high or low as they wish. But in effect Special
Access is free for them.

The Special Access market provides a good look at the future of the
wireless market if the merger with T-Mobile goes through. You'll have a
duopoly that can charge whatever they want, provide whatever services
and products they want because customers don't really have an
alternative. There will still be a few small players in the wireless
market just as there are a few small providers now in the Special
Access market, all of which are slowly being marginalized. Not a pretty
picture, but that's what's happened in Special Access, and it could be
the future for Wireless as well.

Wayne Rash is a Senior Analyst for eWEEK Labs and runs the magazine's Washington Bureau. Prior to joining eWEEK as a Senior Writer on wireless technology, he was a Senior Contributing Editor and previously a Senior Analyst in the InfoWorld Test Center. He was also a reviewer for Federal Computer Week and Information Security Magazine. Previously, he ran the reviews and events departments at CMP's InternetWeek.

He is a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine. He is a regular contributor to Plane & Pilot Magazine and The Washington Post.